Reed's Inc. Announces First Quarter Financial ResultsReed's Inc. Announces First Quarter Financial ResultsGLOBE NEWSWIREMay 15, 2017

LOS ANGELES, May 15, 2017 (GLOBE NEWSWIRE) -- Reed's, Inc. (NYSE MKT:REED), maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its fiscal first quarter ended March 31, 2017.

Financial Results for the First Quarter 2017 versus First Quarter 2016

  • As previously announced, first quarter net sales decreased from $10.0 million to $8.3 million
  • Private label and kombucha sales were down significantly year over year and were the primary contributors to the sales decline
  • Gross profit decreased from $1.9 million to $1.1 million
  • Gross margin decreased from 19% to 13%
  • Operating expenses decreased 15% driven by:
    •  Delivery and handling expenses decreased 12% from $0.8 million to $0.7 million
    •  Selling and marketing expenses decreased 24% from $1.0 million to $0.8 million
    •  G&A expenses decreased 8% from $1.2 million to $1.1 million
  • Net loss was ($2.0 million) versus ($1.6 million) in the year ago period
  • Net loss per share was ($0.14) versus ($0.12) in the year ago period

“Our first quarter results were disappointing and we are actively rebuilding the business to return to growth and profitability,” commented Reed’s Interim Chief Executive Officer Stefan Freeman. “We are in the process of a thorough evaluation of the business and are establishing both short and long term goals to return to higher levels of profitability.  In short, we are simplifying the business without sacrificing our core brands or flavors.  We have implemented a program to reduce the number of product packaging options by more than 100.  We believe this stock keeping unit (SKU) rationalization will be a significant benefit to our co-packers, customers and our own production operations.”

Mr. Freeman continued, “We have made significant progress towards the launch of our new low calorie soda that we anticipate introducing to the market this fall. The product tastes amazing and it is hard to believe that it has 10% of the calories of a traditional sugar based soda.  Consumers have been demanding it and we have developed it using all natural ingredients.  Simply put, it is fantastic.  In addition, this fall we plan to relaunch Culture Club Kombucha in our best-selling five flavors featuring new, simpler packaging that includes a new bottle, cap and label that will be more efficient and cost effective to produce.  Lastly, the field test of our natural fountain soda continues at one of the largest fast casual restaurant chains and we intend to continue expansion of this program with additional customer pilots later this year.  We believe the new product offerings will better resonate with our customers who are looking for healthy alternatives to sugary soft drinks.

“We are focused on opening new channels of distribution including deeper conventional channel penetration as well as targeting the up and down the street and on premise channels. We have better products than our competitors and we are going to fight to regain our market share. We believe that there is significant opportunity for an all-natural product offering in the convenience store channel.  To better integrate into this new channel we are looking at making our products available in cans for distribution where bottles are not appropriate. We are very excited about all the opportunities ahead for the various all natural Reed’s beverage lines.  Today, we are looking at the business with a new perspective and underlying goal of generating better margins and driving improved profitability,” Mr. Freeman concluded.

Dan Miles, Chief Financial Officer of Reed's stated, “The majority of our sales decline was attributable to private label and kombucha that were collectively down approximately $1 million versus the prior year period. We continued our discipline of controlling expenses and realized operating expense savings of 15% during the quarter.  We are targeting all aspects of our cost of goods structure and anticipate additional savings by the end of the year. Additionally, our margins will begin to show the implementation of our price increases in the third quarter.

“Early in the second quarter, we received a $3.4 million strategic investment that we believe will better position us to capitalize on the peak soda selling season and the launch of our revolutionary and great tasting low calorie soda line. In conclusion, we remain focused on driving improved margins and profitability through our core brands and incremental product launches,” Mr. Miles concluded.

The Company will conduct a conference call today at 4:30 PM EDT to discuss its 2017 fiscal first quarter results. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time:

Domestic callers should dial 1-888 225 8011
International callers should dial 1-303 223 4375
A replay of the call will be available by the following day in the investor relations section of the Company's website at: http://www.reedsinc.com/investors/.

About Reed’s, Inc.
Reed’s, Inc. makes the top-selling sodas in the natural and specialty foods industry and are sold in over 15,000 natural and mainstream supermarkets nationwide. Reed’s products are sold through an additional estimated 40,000 accounts that include specialty gourmet, natural food stores, retail stores, convenience stores and restaurants nationwide and in select international markets. Reed’s has sold over 500 million bottles since inception in June 1989 and is considered the leader of the fast growing craft soda category. Its seven award-winning non-alcoholic Ginger Brews are unique in the beverage industry, being brewed, not manufactured and using fresh ginger, spices and fruits in a brewing process that predates commercial soft drinks. The Company also owns the top-selling root beer line in natural foods, the Virgil’s Root Beer product line.  In 2012, the Company launched its Reed’s Culture Club Kombucha line of organic live beverages. Other product lines include Reed’s Ginger Candies and previously Reed’s Ginger Ice Creams.

For more information about Reed’s, please visit the Company’s website at: http://www.reedsinc.com or call 800-99-REEDS.

Follow Reed’s on InstagramTwitter and Facebook.
Reed’s Facebook Fan Page at https://www.facebook.com/ReedsGingerBrew

SAFE HARBOR STATEMENT
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by these statements. The forward-looking statements contained in this press release are based on various factors and were derived using numerous assumptions. In some cases, you can identify these forward-looking statements by the words “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “target”, “aim”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, or the negative of those words and other comparable words.

Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this press release may include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures, expected growth, profitability and business outlook.

Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include, but are not limited to, the Company’s ability to manage growth; manage debt; meet development goals; and other important risks and uncertainties referenced and discussed under the heading titled “Risk Factors” in the Company’s filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements contained in this press release are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligations to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.


  
REED’S, INC.
CONDENSED BALANCE SHEETS
   
  March 31, 2017   December 31, 2016 
ASSETS (Unaudited)  
Current assets:  
Cash$  197,000 $  451,000 
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $282,000 and $256,000, respectively   2,414,000    2,485,000 
Inventory, net of reserve for obsolescence of $165,000 and $115,000, respectively   5,516,000    6,885,000 
Prepaid and other current assets   377,000    500,000 
Total Current Assets   8,504,000    10,321,000 
Property and equipment, net of accumulated depreciation of $4,984,000 and $4,719,000, respectively   7,934,000    7,726,000 
Brand names, net of reserve for impairment of $224,000 and $224,000, respectively   805,000    805,000 
Total assets$  17,243,000 $  18,852,000 
   
LIABILITIES AND STOCKHOLDER'S DEFICIENCY  
Current liabilities:  
Accounts payable$  6,617,000 $  5,959,000 
Accrued expenses   191,000    215,000 
Advances from officers   380,000    -  
Line of credit   3,530,000    4,384,000 
Current portion of long term financing obligations   197,000    190,000 
Current portion of capital leases payable   187,000    183,000 
Current portion of bank notes   953,000    953,000 
Total current liabilities   12,055,000    11,884,000 
   
Other long term liabilities  
Other liabilities   129,000    130,000 
Long term financing obligation, less current portion, net of discount of $797,000 and $825,000, respectively   1,337,000    1,363,000 
Capital leases payable, less current portion   389,000    438,000 
Bank notes, net of discount $32,000 and $78,000, respectively   6,077,000    5,919,000 
Warrant liability   766,000    775,000 
Total Liabilities   20,753,000    20,509,000 
   
Stockholders' Deficiency  
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding   94,000    94,000 
Common stock, $.0001 par value, 19,500,000 shares authorized, 13,982,230 outstanding   1,000    1,000 
Additional paid in capital   30,111,000    29,971,000 
Accumulated deficit   (33,716,000)   (31,723,000)
Total stockholders' deficiency   (3,510,000)   (1,657,000)
Total liabilities and stockholders' deficiency$  17,243,000 $  18,852,000 
   


 
REED’S, INC.
CONDENSED STATEMENTS OF OPERATIONS
 
  2017  2016  
Net sales$   8,295,000  $   10,004,000   
Cost of goods sold   7,239,000    8,111,000  
Gross profit 1,056,000  1,893,000  
    
Operating expenses:   
Delivery and handling expenses 743,000  849,000  
Selling and marketing expense 788,000  1,041,000  
General and administrative expense 1,111,000  1,205,000  
Total operating expenses 2,642,000  3,095,000  
    
Loss from operations (1,586,000) (1,202,000) 
Interest expense (416,000) (378,000) 
Change in fair value of warrant liability 9,000   
Net loss attributable to common stockholders$   (1,993,000)$   (1,580,000) 
Loss per share – basic and diluted$   (0.14)$   (0.12) 
Weighted average number of shares outstanding – basic and diluted   13,982,230    13,184,000  
 


 
REED’S, INC.
CONDENSED STATEMENTS OF CASH FLOWS
 
  March 31, 2017  March 31, 2016 
Cash flows from operating activities:  
Net loss$  (1,993,000)$  (1,580,000)
Adjustments to reconcile net loss to net cash provided (used) in operating activities: 
Depreciation  and amortization 194,000  261,000 
Fair value of vested stock options issued to employees and directors 140,000  169,000 
Increase (decrease) in allowance for doubtful accounts 26,000  (93,000)
Increase in reserve for inventory  50,000  
 Change in fair value of warrant liability (9,000) 
Changes in operating assets and liabilities:  
Accounts receivable 45,000  313,000 
Inventory 1,319,000  (415,000)
Prepaid expenses and other assets 124,000  312,000 
Accounts payable 656,000  263,000 
Accrued expenses 6,000  15,000 
Payment of other long term obligations (31,000) 0 
Net cash provided (used) by operating activities 527,000  (755,000)
Cash flows from investing activities:  
Purchase of property and equipment (41,000) (186,000)
Net cash used in investing activities (41,000) (186,000)
Cash flows from financing activities:  
Advances from officers 380,000  0 
Proceeds from stock option and warrant exercises   -    45,000 
Principal payments on capital expansion loan   (177,000) 
Principal repayments on long term financial obligation (44,000) (37,000)
Principal repayments on capital lease obligation (45,000) (42,000)
Net repayments on existing line of credit   (854,000)   (193,000)
Net cash used in financing activities (740,000) (227,000)
Net decrease in cash (254,000) (1,168,000)
Cash at beginning of period 451,000  1,816,000 
Cash at end of period$  197,000 $  648,000 
   
Supplemental disclosures of cash flow information:  
Cash paid during the period for:  
Interest$  400,000 $  364,000 
Non Cash Investing and Financing Activities  
Property and equipment acquired through capital expansion loan$  288,000 $  354,000 
Property and equipment acquired through capital lease obligations   -    86,000 
 


 
REED’S, INC.
MODIFIED EBITDA SCHEDULE
 
 March 31,
  2017  2016 
 (unaudited)(unaudited)
Net loss$  (1,993,000)$  (1,580,000)
   
Modified EBITDA adjustments:  
Depreciation and amortization 194,000  261,000 
Interest expense 416,000  378,000 
Stock option and warrant compensation 140,000  169,000 
Change in fair value of warrant liability   (9,000)   - 
Total EBITDA adjustments$  741,000 $  808,000 
   
Modified EBITDA$  (1,252,000)$  (772,000)
 
CONTACT: CONTACT:
Reed's, Inc.
Investor Relations
(310) 217-9400 X6
Email: ir@reedsinc.com
www.reedsinc.com

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